Business Model Innovationhttp://blog.business-model-innovation.com
A fresh approach to strategyMon, 11 Sep 2017 17:28:16 +0000en-UShourly1https://wordpress.org/?v=4.9.46750666noA fresh approach to strategyBusiness-Model-Innovationhttps://feedburner.google.comIt’s the business model, stupid! A wake-up call for incumbents like Daimlerhttp://feedproxy.google.com/~r/Business-Model-Innovation/~3/byyC4CYohCQ/
http://blog.business-model-innovation.com/2017/09/its-the-business-model-stupid-a-wake-up-call-for-incumbents-like-daimler/#commentsMon, 11 Sep 2017 17:24:26 +0000http://blog.business-model-innovation.com/?p=1307Continue reading It’s the business model, stupid! A wake-up call for incumbents like Daimler]]>News is full of cool technologies like drones, blockchains or autonomous cars and their disruptive character. Traditional firms have switched to innovation mode and have now cool digital transformation units to use these new technologies. Everybody is happy. Great, isn’t it?Or wait? Can this really work that easy?

I just had a project with a company that has set up an innovation unit to push innovation. They have great people who are very salient with all the tools we use today in holistic innovation management like Design Thinking, Scrum or Lean Startups.

However, when management wanted to use the 3 horizon framework, originally from McKinsey but later further developed by Paul Hobcraft, to map their innovation projects on the 3 horizon matrix, we had problems to rank the projects to the 3 horizons.

The entrepreneurial side: The missing side of innovation

The reason was simple. The focus of the projects was on technology and not on customer’s side of innovation or on the business model. Somehow, it seems that the project managers were happy to have installed the new fancy technology but have forgotten the entrepreneurial side of innovation.

It is important to remember what Michael Schrage has said to innovation:

Innovation is not what you innovators do… It is what customers and clients adopt.

Not only the customer side was missing but also the side how they wanted to use the technology in their business. The following illustration shows the relationship between technology and value creation.

The business model creates the value, not directly the technology*

How could that have happened in a company that has the tools and innovation managers that know how to apply the tools?

Not tools, the right mindset to think in business model is missing

Well, tools are one side, the mindset of the top managers to really question your current business is another. There is so much talk today that companies should disrupt themselves and that they have to set up ambidextrous organizations to do so. Well, the easy part is setting up cool skunk works, the difficult part is to question yourself who you are. That is the tough part.

Your identity is very closely related to your dominant business model your company runs. The difficult part is to question yourself who you are and who do you want to be in the future due to the new technology. Your identity is very closely related to your current success as a dominant incumbent based on a dominant business model.

If you are a successful bank, you will digitalize a bank and not think about how sexy payment services are and how you can create payment services where you do not need a bank anymore like Paypal, Apple Pay or Google Wallet do. Actually, it is pretty much the end of your career when you work in payment operation center of a traditional bank, even that payment is the service that keeps customers today with their banks.

Daimler thinks in car registrations; Tesla in customers’ relations.

If you are a successful luxury car brand, you digitalize the current business model (eg. offering even more hardware options to individualize the cars as Daimler is doing it with its Smart Factory initiative) and not rethink really who you are, how technology will change the way what a car is and what will be a software function or what will be hardware and why customers really buy your cars and how this can change. Of course, Daimler tries a lot of new business initiatives outside their core business like Car2Go, MyTaxi or Moovel, but with the softwareication of their core product and its implication on the core business model, they are pretty late. Think how long it took the German car industry to understand the power of maps. With the acquisition of Here, they try to change that. However, they are some 10 years later than Google and still, most cars have fixed installed maps in their navigation systems that can only be updated at a car dealer.

Tesla just showed that with a simple software update how to update the car (hardware) when it extended with an over-the-air software update the range of their cars in lieu of hurricane Irma. Will a hardware company like Daimler ever understand that Tesla is not just E-mobility but the master of using software to build a real-time relationship with the driver and their cars? Daimler sells cars via dealers and has no direct contact with its customers. Tesla has a continuous relationship with its customers.

That’s the major difference in their business model. The electric engine is just one part of their different business model.

It is not the technology that matters, but what you with technology to serve your customers better.

Technology does not help you to disrupt yourself, it is what you want to do with the technology

So what helps to overcome the focus on technology and focus on what business model innovation you can create with the technology. It is actually an unlearning and learning journey at the same time while unlearning is the most difficult part of the whole trip.

Find a CEO and top managers that want to spend their most precious resource, their time, on the process to question themselves and what made them successful. That time is the precondition of Disruption and the scarcest resource in a firm. See “Who is in charge of business model innovation.“

Introduce Business Model Thinking in your firm by using the business model framework (important to include the Team & Value element) in all your strategy and innovation process. Put traditional thinking in industries aside and focus on customers and why they buy and not on markets.

Understand the business idiosyncrasies of an upcoming technology. That is your Technology Insight. It’s always worthwhile to look at advanced companies that have an edge in understanding what is businesswise possible with a new technology. Apple disrupted Nokia because it did not sell hardware like Nokia anymore but a relationship including access to a new ecosystem that together created a whole new value proposition to customers.

Try to understand the open assumption behind your business. To do so describe the business model (not just on the canvas since space is limited.) Be honest and frank to yourself. Otherwise, an external competitor will find the weaknesses of your business model.

Try to unveil the tacit assumptions in your business and industry like how you measure success in your industry like registrations of your brand. Here it helps to describe the revenue model and how you measure success and how you promote people. That is the resource allocation process which is often more powerful than the official formulated strategy (see work of Joseph Bower that formed the foundation of the disruptive technology theory by Clayton Christensen).

Find insights into the behavior of your current customers. Think why these people buy your products, what jobs they solve with your products and why they love your products (or not).

Find insights into the jobs-to-be-done of your unserved customers and “low-end” customers.

Now, work can start to experiment with all the different insights to explore new business models.

……

Well, the rest of this learning journey is different from firm to firm and different from technology to technology. So have a good journey, dear incumbents since otherwise newcomers will eat you for lunch.

]]>http://blog.business-model-innovation.com/2017/09/its-the-business-model-stupid-a-wake-up-call-for-incumbents-like-daimler/feed/21307http://blog.business-model-innovation.com/2017/09/its-the-business-model-stupid-a-wake-up-call-for-incumbents-like-daimler/14 Tips for Entrepreneurs to build a business model innovationhttp://feedproxy.google.com/~r/Business-Model-Innovation/~3/v-zdZD7rtmw/
http://blog.business-model-innovation.com/2016/09/14-tips-for-entrepreneurs-to-build-a-business-model-innovation/#respondMon, 12 Sep 2016 10:49:34 +0000http://blog.business-model-innovation.com/?p=1282Continue reading 14 Tips for Entrepreneurs to build a business model innovation]]>How do entrepreneurs develop a business model that is highly scalable, unique, loved by customers, a money-making machine, disrupt an industry, be a unicorn and just work 4-hours per week? In this post, you find the golden keys to success. Guaranteed!

Well, not really. A 4 hour work week might work for Tim Ferries, but you as an entrepreneur have to find the business model that fits your customers and you. That is the right stuff. Building a great business model is work, much of it. You can make every mistake by yourself or you can have a more structured and highly creative approach to building a sustainable business model.

In the following slide deck, I give you my 14 tips how you can become a better entrepreneur. Still, it is you who has to do the thinking, the learning, and the work. You can read as many smart books as possible. You are unique. You are not Steve Jobs or Tim Ferries. You are you. So make the best out of your potential.

]]>http://blog.business-model-innovation.com/2016/09/14-tips-for-entrepreneurs-to-build-a-business-model-innovation/feed/01282http://blog.business-model-innovation.com/2016/09/14-tips-for-entrepreneurs-to-build-a-business-model-innovation/Steve Jobs on values in your business modelhttp://feedproxy.google.com/~r/Business-Model-Innovation/~3/xX2VmZ8S4h8/
http://blog.business-model-innovation.com/2016/06/steve-jobs-on-values-in-business-model/#commentsMon, 20 Jun 2016 16:55:58 +0000http://blog.business-model-innovation.com/?p=1270Continue reading Steve Jobs on values in your business model]]>Business Modeling is often seen as process to rearrange the building blocks to an innovative business model. What people forget is that a business model is not just the building plan of your business but also should give answer to the question “Why should your business exist from a customer perspective?” So a business model is not just a building plan but also how you give meaning to your customers and your employees.

Values comes in different forms in the business model: First, it is the value proposition. You propose to your customers what value you will create for them when they engage with you. The second is your values and believes you share among the team that makes a great company. These two values are soft factors and sometimes fluffy. However, they are the foundation so that you can capture the economic value with your revenue model. These values make the difference.

Just watch Steve Jobs on values. And then apply that to your business model and your value proposition. You see, the value proposition has absolutely nothing to do with your product. So what is your core belief? What are your values? What do you stand for?

Simple questions, very difficult answers. Answer them. Try. Try again until you know what you stand for.

Your core values as starting point for business model innovation

Very few firms have very strong values and keep them over many years. But these values make the difference between ordinary good companies and great companies. Do you want to be great? Then work on your value proposition and your values. That gives meaning to you and your customers!

]]>http://blog.business-model-innovation.com/2016/06/steve-jobs-on-values-in-business-model/feed/21270http://blog.business-model-innovation.com/2016/06/steve-jobs-on-values-in-business-model/Who is in charge of business model innovation?http://feedproxy.google.com/~r/Business-Model-Innovation/~3/ZoKXVst8XCM/
http://blog.business-model-innovation.com/2016/02/who-is-in-charge-of-business-model-innovation/#commentsMon, 15 Feb 2016 18:06:22 +0000http://blog.business-model-innovation.com/?p=1259Continue reading Who is in charge of business model innovation?]]>In recent posts, I looked at the right boxes to think in and the process to develop an innovative business model, it is now time to look at the people who are suppose to innovate the business model in large corporations. This seems to be a simple question and in large corporation there should be a person in charge and capable of execution.

But wait.

Let’s take a look at a traditional organization, the people there and their ability to execute business model innovations.

The Strategists?

Officially, the strategy guys take the big picture view on a firm. But most of strategists are very detached from the real business and particularly customers. They talk about markets, read Gartner technology forecasts and predict the future by analyzing the past, but most of them have never met a customer in person and have never programmed or have developed a product that is later sold. Most have a background in analytics and large consulting companies.

They are very detached from business but think they know where business should be moving to.

The Marketeers?

The marketing guys unfortunately forgot that originally marketing was about the whole business with their 4 Ps. Today, they are mostly in marketing communication and see the customer through abstract market studies, but never see a real customer since this the job of sales.

Sales?

The sales guys have the most contact with customers. Unfortunately, they think in quarters to fulfill their sales targets. They are trained to get sales volumes and not discuss what customers love in two to three years.

Research & Development?

The R&D people are in a firm in charge of technology and product innovation. They love technology, the products, intellectual property and toll-gate processes. But they dislike customers since they usually think they know what is best for the customer. Usually, they meet customers only in focus groups, but rarely shadow them in real life.

And a lot of service firms do not even have R&D departments or service management.

Finance? Really?

The finance people know the figures. They understand the economics of a business. But they also have little sense for the customers and what the customers really value. Pricing is seen as yield management to maximize the price customers are willing to pay instead of asking how can the company really get the maximum of value to the customer and then find the right price. A fantastic example – in a very bad way – is the airline industry where the economist took over and when economists take over, you get a dismal industry.

Actually, finance could be a great starting point for innovation as revenue model innovations like prepaid in mobile communication or concentrating on the core activities as South Western has shown in the airline business.

Heads of Business Units?

In large corporations, you have heads of business units. A business unit is usually defined as a matrix of product and market. They are the closest to customers and the products. They should be the driver of business model innovation but mostly; they are only in charge of a small slice of the whole business.

And the CEO?

The CEO is the guy who »runs« the whole business. Mostly due to experience of the past, he (and very few she) became CEO. He knows everything of the current business and but rarely meet the »bread and butter« customers and understands their jobs-to-be-done. CEOs are too busy for this. They meet the best customers but not the one that make 80% of the business. The best customers love the current value proposition as Clayton Christensen has shown in his work. Disruptive innovation is coming from the low end of the market or from non-customers. The CEO does not know these customer segments.

The core job of the CEO is to keep the current operation running and the organization synchronized. And actually, he is the one who has to unlearn the most since his track record and all his know-how of the past made him CEO. So he has to lose the most.

Very few CEOs have a track record to reinvent an industry. A shame.

Is it the innovation manager? Or do we outsource innovation to skunk work operations?

So companies understood this, that actually nobody is really in charge of customer-centric and disruptive innovation aka business model innovation. Therefore, they created the position of innovation managers and opened cool, hip skunk works where young and innovative people think and build innovative businesses. Academia and consultants came up with the term ambidextrous organizations, an organizational form that is suppose to master the current and the future business.

Most innovation managers I meet are great to talk to. They see the upcoming changes, they have good ideas, however, they are powerless. The brutal fact is that power in firms comes from the Profit & Loss statement. Only the ones that have financial resources can drive the strategy of a firm. That is a well know fact, but still we put belief in innovation managers and skunk work operations to save our company. Most innovation managers are fig leafs.

Ambidextrous organisations?

So what about ambidextrous organizations? It’s a fantastic buzzword. However, I am still waiting for the results but I am open to anybody who shows me successful examples. Please mention them in the comments. Personally, I am not convinced since this is just another buzzword and we have seen so many failures like Pandesic or any other incubator form the late New Economy. But it is fantastic sales proposition for any consultancy.

Innovators’ dilemma still applies

Resources aka your income come today from the current customers. The definition of a disruptive innovation is that at the beginning your current customers do not like disruptive innovation. They prefer sustaining innovation and if you are a good company, you will serve your current customers very well, and thereby your chances for disruptive innovations diminish. That’s the reason why Clayton Christensen calls this »The innovator’s dilemma«.

And this is still true. Unfortunately.

Who should be in charge of business model innovation?

Business model innovation is a state of mind and not a question of “in charge“. All of the above mentioned units have great input for the innovation process, but they need an united view of the business. And here the business model canvas helps to unveil the tacit assumption of the current business. Everyone sees what impact they have in the whole business model and how they interact with the other parts of the business.

And once, you have a common view, you can identify technologies or unsolved jobs-to-be done to see what impact these have on the whole business model and where you can change your business model.

You need diversity in your team to challenge really the current way of thinking. Business models are never reality but the social construct of the dominant group of managers. Only with diversity you can overcome your bias of the dominant logic of your firm. Besides diversity, your process has to be agile, adaptive, full of unlearning and learning and rapid prototyping to test your assumptions.

Besides diversity and an agile process you need a culture that can cope with dissent, inconsistency and ambiguity. Pretty difficult in an environment where your current success is based on a shared set of believes aka corporate culture that are good for running the current business smoothly.

Start today, since this is not something you can accelerate with money. Unlearning takes more time than learning. And the newcomers do not have to unlearn. They just have to learn.

So better hurry.

]]>http://blog.business-model-innovation.com/2016/02/who-is-in-charge-of-business-model-innovation/feed/71259http://blog.business-model-innovation.com/2016/02/who-is-in-charge-of-business-model-innovation/Book on Business Model Innovationhttp://feedproxy.google.com/~r/Business-Model-Innovation/~3/Lud1nsaPhvQ/
http://blog.business-model-innovation.com/2015/11/book-on-business-model-innovation/#respondMon, 30 Nov 2015 15:28:33 +0000http://blog.business-model-innovation.com/?p=1238Continue reading Book on Business Model Innovation]]>Normally, we do not use the blog for announcements, however we have two good news that we want to share with you. First, a workbook for startups was just released and second, we have teamed up with Orange Hills to form fluidminds Australia.

New Book on “Starting with the Right Business Model”

The book “Das Richtige gründen: Werkzeugkasten für Unternehmer” or “Starting the Right stuff: Toolbox for entrepreneurs” is just being released. It’s a workbook with which entrepreneurs can develop from an idea a business model that works or as we say: “Das Richtige” or “The Right Stuff”.

With the book entrepreneurs can, based on customer & market insights, design the four elements of a business model:

Besides the building blocks, we give guidance how to start the process to find the right thing. Good business model design starts with customer & market insights and testing early the basic assumption. We believe that not the Minimal Viable Product (MVP) should be tested but the Minimal Viable Business Model (MVBM) where you test the value proposition, your offer and the distribution & communication channels before going full speed ahead.

The book is written in witty, precise and almost humorous language and designed to inspire people to get out of their comfort zone. We want to inspire big thinking, at the same time we force entrepreneurs to be precise in what they want to start with. Any great vision starts with something relevant customers want and buy.

In the book, we unveil the secrets of the business models of German and Swiss companies that are global, but often hidden champions. In my humble opinion we focus too much on American multinationals or Internet companies when writing case studies on interesting business model innovators. We forget that in economically successful countries like Germany or Switzerland, we have many Mittelstand companies or mid-sized family owned businesses that are suppliers of core technology to the world but not known in the world. So if you want to learn about German and Swiss powerhouses, you have to learn German to read the book or find a publisher that is willing to translate the book ;-).

The book was produced together with Thomas Meyer, a well known Swiss author, and Fritz Gottschalk, a doyen of Swiss graphic design (Remember the font Helvetica or Frutiger? All fonts from Swiss designers). Two of our core values, we shared in the team, were beauty and reduction to the essentials. If we succeed is up the judgment of our readers.

Wolfsburg AG, the innovation agency of Volkswagen AG and the city of Wolfsburg, sponsored our team. We are very grateful for their support.

So far, the book is available only in German, but we are open to other languages. You can buy the book in any German bookstore, Amazon.de or Amazon.com. More information on my German Blog Das-Richtige-gruenden.de.

My company, fluidminds Inc., joined forces in Australia with Norbert Haehnel and Orange Hills. The result is our joined company fluidminds Pty Ltd. based in Sydney. Norbert is a seasoned manager in the high-tech industry who wants to bring business model innovation to Australia.

Australia is an interesting turf for business model innovation since the country is still heavily depended on the export of raw material to the rest of the world. Business Model Innovation can and will help Australia to be less depended on the volatility of commodity prices. Orange Hills, the second partner in the Australian venture, is a specialist in innovation consulting that was voted into the top of any innovation consultancy in Germany by brand eins magazine. Orange Hills has developed an outcome driven tool box to guide companies through the rethinking and rebuilding of the business model of companies. Orange Hills’ competence is to trigger business model innovation that works since the manager have learned to unlearn and focus on an outcome that works today and less on a vision that is too far into the future. I’m happy to have both on board.

I was twice in Australia this year for keynotes. In March in Sydney and Brisbane thanks to the Hargraves Institute and in September thanks to Australia Industry Group on a panel with Dave Gray and Gary Hamel in Melbourne. It was fantastic to have all the discussion and see the huge opportunities for business model innovation in Australia.

Norbert is happy to hear from you if you have any business model challenge you want to address in Australia.

]]>http://blog.business-model-innovation.com/2015/11/book-on-business-model-innovation/feed/01238http://blog.business-model-innovation.com/2015/11/book-on-business-model-innovation/We “totally screwed up”: Values and Behaviors in Volkswagen business modelhttp://feedproxy.google.com/~r/Business-Model-Innovation/~3/6J9SwM4D1vE/
http://blog.business-model-innovation.com/2015/09/values-and-behaviors-in-volkswagen-business-model/#commentsTue, 22 Sep 2015 17:38:38 +0000http://blog.business-model-innovation.com/?p=1229Continue reading We “totally screwed up”: Values and Behaviors in Volkswagen business model]]>Volkswagen, the world’s second-biggest carmaker admitted that it has been dishonest with customers and regulators. It has installed a software in its cars that falsifies emissions data of its diesel cars. Unfortunately, it is a perfect example where the values promised to customers and the real behavior outright contradict. And because of the mismatch, Volkswagen is in a perfect storm.

Volkswagen faces a fines up to $18bn, criminal charges against its executives and legal actions from customers. At the same time a third of its market value was wiped out or the a staggering amount of around €30bn.

The head of the US operations of Volkswagen admitted that they “totally screwed up“. And I hope he meant the deed and not the disaster afterwards.

What happened? Volkswagen had to admit that 11 million of its diesel cars could be equipped with software to cheat on emission tests. The American Environmental Protection Agency (EPA) had accused the firm of faking pollution tests and thereby cheating on regulators, the public and customers.

The case is already bad enough, but what is even worse is that the deed and the behavior that lead to the deed totally contradicts what Volkswagen promises in its value proposition.

Volkswagen states in its brand three core messages of which one is: Responsible

Volkswagen always played the role of the company with high morals. Responsibility was their core value they wanted to pursue and used heftly in their marketing.

And cheating deliberately on emission test is just the opposite of being able to differentiate what is right or wrong. Cheating is wrong! And it is not cheating software but the whole behavior that let a whole company come up with a software to cheat. Dozens and more people at Volkswagen must have known this and did nothing against.

What does this tell us about the culture they have at the firm?

Unfortunately a lot.

And unfortunately, the car industry has a bad track record between their promises and reality when it comes to emission and fuel consumption. The car manufacturers promise low fuel consumption however, they can only be achieved in unrealistic test scenarios and not on the road. Actually, it’s legal but totally against what Volkswagen promises to be responsible.

And as a responsible company you should live up to your standards and do not try to seek loopholes in regulation to mislead customers and the public. Still car companies do.

Not your stated values are reality but your behavior in your business (model)

The deed is actually not the worst. The worst is that the huge gap between what the management of Volkswagen promised to be their values (which the public loved and believed) and the actual behavior.

The gap and the lost trust in their value proposition is the long-term damage and probably the death sentence to one of Volkswagen’s core technologies, the Diesel, in America. That is real damage, more than any fine, any short term dive in the market value.

Not your stated values in business model are important but the reality. And in reality, your behavior really communicates the entrenched values of your firm. Don’t create a perception gap.

And that is the key take-away. Get your behavior aligned to what you promise. It’s a walk on the tightrope. Don’t overpromise. Don’t build up a brand image which is an illusion.

Having all elements and building blocks of a business model aligned in reality is art but it makes the difference between an ordinary firm and great, sustainable firm!

Hopefully, Volkswagen will get its behavior aligned with its promised values again and their action really shows their true values they promised before.

It’s still a great company – with a huge moral and business issues to cope with.

]]>http://blog.business-model-innovation.com/2015/09/values-and-behaviors-in-volkswagen-business-model/feed/31229http://blog.business-model-innovation.com/2015/09/values-and-behaviors-in-volkswagen-business-model/The offer is only one building block to fulfill the value propositionhttp://feedproxy.google.com/~r/Business-Model-Innovation/~3/hNblGo897z8/
http://blog.business-model-innovation.com/2015/06/product-is-not-the-value-proposition/#commentsTue, 16 Jun 2015 17:18:42 +0000http://blog.business-model-innovation.com/?p=1206Continue reading The offer is only one building block to fulfill the value proposition]]>One of the beauties of the business model thinking is that we learn to see a business totally different if we really apply stringent thinking and dissect a business into its building blocks. And one of the most important concepts is that the value proposition is not the product. Why?

It’s not the product that creates value but the value proposition. The whole value architecture including the product, the revenue model and the team & values all have to deliver the value the value proposition is proposing.

Deadly business with a value proposition that customers and democracies need

A simple, a bit eccentric example illustrates this. Take manstopper ammunition that is for very good reasons banned by the Hague Convention in international warfare.

Manstopper ammunition does not sound like a lovable product and in terms of Alex canvas as a good value proposition?

Actually, manstopper ammunition is the offer and not the value proposition. A good, and even meaningful value proposition depends from your customers, the job-to-be-done and the benefit you create for your customers. These building blocks make up the value proposition. The offer aka product is just one part to fulfill the value proposition. That is extremely important distinction.

What is a meaningful value proposition for manstopper ammunition?

If you see the police in western democracies as your customers and you deliver with the ammunition a safe method for them to stop dangerous criminals like terrorists or plane hijackers than you have a good value proposition.

You do not have to like this kind of business but in a democracy the state has the monopoly on legitimate use of force even of lethal force. And in such context, manstopper ammunition has for S.W.A.T. and the hostages a huge benefit since it reduces the risk of collateral damage and of death of the hostages.

You might not like this drastic example but it illustrates the difference between the offer and the value proposition. The value proposition is delivered later by all building blocks of the value architectures. In the ammunition case, a distribution system that only allows police corps to purchase this ammunition is key to delivery the value proposition.

The value proposition is where the value is defined. The whole business model has to deliver the value proposition, even the revenue model since the right pricing adds value as well. And a good value proposition gives meaning to the employees as well. At the same time, the team & values have to support and fulfill the value proposition as well.

Mechanical watches: From a timepiece to a piece of jewelry

Another example to show why it is important to distinguish product and value proposition is the mechanical watch.

Up to the 1970, the value proposition of a mechanical watch was to show the time. With electrical watches, that are much more accurate, this value proposition was not convincing any more and the Swiss watch industry was in decline until it found a new value proposition for mechanical watches. The value proposition of the highly successful Swiss watch industry is that mechanical watch is the only allowed piece of jewelry for man. The mechanical watch was a timepiece and is today a status-symbol. The offer is the same, the value proposition is totally different and all the other building blocks of the business model.

Google’s changing value proposition: From search to finding

The current value proposition of Google is to find information. The product of today to do so is a search engine. In the future we will have context sensible services that give us the right information we might be looking for in the moment. Think about Google Now. The future of searching is finding or the right information at the right time. Google understands this shift in the value proposition.

The missing shift in the value proposition of Kodak: From keeping memories to sharing memories

They did everything right. Kodak invented the digital camera. They have all the patents, but they missed the shifting value proposition customers wanted. Kodak believed that in the digital age, people would still make pictures to keep their memories and therefore they invested heavily in digital printing of digital photos. However, the job a picture does for a customer has changed from keeping memories to sharing memories via social media. Kodak never got that point. They got the technology but never understood the needed shift in their value proposition. Now the business is with Instagram, Facebook or Twitter.

The Kodak is a sad example that you might get the product right (digital camera & pictures) but did not get the value proposition right. Again, a good example to show why it is important to separate the product from the value proposition.

Take-aways

Always separate the value proposition from your offer. The value proposition is what excites your customers. The products is one building block to create the excitement but has to be supported by all other building blocks.

Use the building blocks of the value proposition, customers, jobs-to-be-done and benefit, to understand your business better: Play with options to see the shifts how customers see your value proposition.

Beware of the value perception gap between what you propose and what customers perceive to be your value. It’s a bit like branding. It is not important what you think about your value proposition, it is important what your customers think.

]]>http://blog.business-model-innovation.com/2015/06/product-is-not-the-value-proposition/feed/11206http://blog.business-model-innovation.com/2015/06/product-is-not-the-value-proposition/Do we need visionary leaders for innovative business models?http://feedproxy.google.com/~r/Business-Model-Innovation/~3/-SR9S3Ym9rk/
http://blog.business-model-innovation.com/2015/05/do-we-need-visionary-leaders-for-innovative-business-models/#respondWed, 27 May 2015 05:49:01 +0000http://blog.business-model-innovation.com/?p=1190Continue reading Do we need visionary leaders for innovative business models?]]>When I joined Microsoft in 1993 my decision to do so was stimulated by the picture I had from Bill Gates as a visionary leader. The company’s mission Bill Gates created at that time was “A computer on every desk and in every home”. It was an aspirational vision and motivating target for the scorecards. Would Microsoft be the same company today if the mission would never have existed and Bill Gates visions would have not influenced the product and research agenda in the way he did?

Most famous companies today are connected to visionaries: Apple with Steve Jobs, Amazon with Jeff Bezos, Facebook with Mark Zuckerberg and Tesla with Elon Musk. Does this prove that only visionary leaders create truly successful and innovative companies? How many visionary leaders have failed to create successful and innovative companies? This is much harder to answer than the first question. We only know about success stories, failures do not get the same publicity.

The passion for a visionary value proposition

All of the above named leaders are not only visionaries from a product or services point of view. They are passionate about a value proposition for their customers. Bill Gates core value proposition was productivity gains, Steve Jobs was design and function, Jeff Bezos is price and customer service, Mark Zuckerberg is social sharing and Elon Musk is sustainable clean energy. The products are a means to an end and deliver the value proposition.

Employees in organizations need to understand the value proposition a leader wants to create. Innovation, to realize a value proposition, can occur everywhere in an organisations business model. Truly innovative organisations constantly challenge the status quo and look for different and better ways of achieving the vision.

A true visionary leader is able to view the organisation as an outsider. A fresh perspective allows the leader to forget about the existing customers and look at the entire world as the future market. A good example is Elon Musk with his broader perspective and the creation of multiple companies all supporting his true vision in a very different way.

Visionary companies: Do they need charismatic leaders?

Is your organisation blessed with such a leader? Most of you likely are not. This doesn’t mean you cannot work in a truly innovative company. IKEA revolutionized the furniture industry, Nespresso converted a commodity product into a lifestyle value proposition, Bosch redefined the power tools market and created a new customer segment when facing stiff competition from China. All of those companies don’t have the shining visionary leaders everybody knows. They have created an innovation culture driven by the people and allowed to experiment and explore. They are learning organisations looking at all components of the business model and allow different and diverse ideas to flourish.

A visionary leader does help but is not needed to create an innovative organisation. In some cases a visionary leaders may even hinder innovation as they predefine the path and limit the thinking of the team with the influence they have.

Grundig was a very successful company until 1980 with visionary leader and founder Max Grundig on the top of the organisation. They failed to stay relevant and declined dramatically as the founder of Grundig didn’t create a learning organisation and was relying too much on his past successful instincts.

Innovation can and has to start anywhere in the business model

True visionary leaders create business models that can flourish without them and establish a culture that encourages innovation in all aspects of the business. They empower their people to challenge the status quo and take calculated risks within a safe environment. To look for opportunities that break the rules of the traditional business and provide new ways for growth, fosters learning and encourages independent thinking. They embrace technology, allow experimentation and provide a framework and environment to innovate any aspect of the business model.

]]>http://blog.business-model-innovation.com/2015/05/do-we-need-visionary-leaders-for-innovative-business-models/feed/01190http://blog.business-model-innovation.com/2015/05/do-we-need-visionary-leaders-for-innovative-business-models/The pull in business models: 3 types of Attractors to look forhttp://feedproxy.google.com/~r/Business-Model-Innovation/~3/g0kD-8c_Sdw/
http://blog.business-model-innovation.com/2015/01/pull-in-business-models-3-types-of-attractors/#commentsThu, 29 Jan 2015 20:48:41 +0000http://blog.business-model-innovation.com/?p=1162Continue reading The pull in business models: 3 types of Attractors to look for]]>So you need to know what your customer will love? What excites them? What moves them? This of course allows you to begin the process of designing a business model that delivers to both the customer and the business. Traditional business motivations are usually a push approach. But is this the future? Guest post by James Streeton-Cook

Right now, let’s make something better than what’s out there, something really cool and we’ll beat the competition and make a mint.

Since you are reading this post then we can assume you know better.

Current business thinking it is all about what the customer needs. So let’s pull out the Henry Ford standard about ‘faster horses’ for that one. Enough of the push!

Power of Pull – It’s a Lean Thing

Lessons from Lean Business have taught us the power of pull systems. »The core idea of lean is to maximize customer value while minimizing waste.«

When creating something new, some new value, be that a business model; product or service; or even a new industry platform – value is pulled into arrangement (not pushed) by Attractors involved.

The same thing happens in nature and as far as I know is current thinking for the formation of the universe. So with a bit of imagination, pull will also be relevant in business model innovation. It is a non-linear thing and most of everything is made up of non-linear systems. A river flows down hill. Why?

The pull in a good value proposition: 3 Types of Attractor

There are 3 types of Attractors to look for in your discovery, insight and understanding of what will excites your customer.

Point Attractors

Path Attractors

Strange Attractors

(Geek Alert: Be warned, things are about to get a bit geeky. For more info on Attractors look here)

1. The Point Attractor

A point attractor is an explicit requirement or set of requirements. Your customer needs a bolt and it what they require is a grade 8.8 M10x60 hex bolt to fix a frame together. Or perhaps your small business needs a 10 Mbps DSL connection because it uses cloud-based services for accounting.

Quality, cost and service associated to the job done by the point attractor are usually the main grounds for competition. Invention of alternative ways to do the job may exist but you will need to move the customer. Localization and social benefits are emerging as approaches to offer a point of difference and additional value. Let explain this.

Great Ocean Road Milk

Fresh milk is the main form of milk consumed in Australia. Milk is essentially a food commodity. Supermarkets are one of the main retail channels for milk sales and when supermarkets entered the milk market with there own brands they priced it much lower. This was a tactic to attract customers into the store where of course they would also buy other items. Branded milk is still available in supermarkets but costs around 50% more and has significantly less shelf space then it used to. Many customers still buy branded milk based upon perceived cost and quality.

A dairy company in southern Australia, Warrnambool Cheese & Butter (WCBF), produces the Great Ocean Road milk brand for sales in supermarkets in this region. Great Ocean Road milk sells for the same price as the major milk brands however they are leveraging their value chain to sell the localized content and freshness of the product. WCBF is also known for paying a fair milk price to dairy farmers. Great Ocean Road milk have shown that by demonstrating a connection back to the community they offer additional benefits that go beyond their product. These points of difference have boosted the strength of the value proposition for Great Ocean Road milk and as a result the shelf space they have in supermarkets is growing.

Taking this a step further the social benefits of business are becoming a notable point of difference. Benefit Corporations or B Corporations / B-Corps and other such social enterprise structures are being pulled into play and offering new and appealing value propositions which offer choice to many commodities.

2. The Path Attractor

A path attractor is a set of requirements that initiates behaviours that lead to a particular action or result. A good example is driving a car along a road. There are physical constraints, a set of rules to follow and likely other road users to negotiate. If you want to travel the road (the path) the attractors involved draw a certain outcome. Getting the job done of travelling to a destination.

The systems business put in place to create required outcomes are also forms of path attractors. As can be the design of your website to drive particular customer behaviours.

Path attractors are the foundation for much of the low hanging fruit available in business model innovation.

Yarra Trams – Tramtracker

In my hometown of Melbourne, Australia, we have one of the worlds largest tram networks. It is run by Yarra Trams. When catching a tram, one of your primary concerns is will I get to my destination on time. Much of the time trams share the same road as other traffic and as such can be affected by the level of congestion on the road. So there you standing at a tram stop waiting for your tram and it hasn’t arrived yet. Will I get where I need to on time, the job you need to do. You just don’t know.

The tram network operators have introduced a smart phone app Tramtracker that provides real-time intelligence on when your tram should arrive for you to board and the time you can expect to arrive at your destination. Providing this knowledge has filled the unknown of not knowing if you will be on time. (Yes you might say now you know you’ll be late J but that is more comforting than not knowing).

You are now able to trust the transport to do the job of getting you along the path, your journey at a predictable time. Tram users report increased confidence in using the tram network. Timing is one of the attractors in the path and by addressing it Yarra Trams has increased the power of its value proposition.

3. The Strange Attractor

A strange attractor includes number of dynamic variables. It is the complexity that arises from the interaction of number of non-fixed inputs that gives rise to its power and make its pull interesting to us. Strange attractors are usually temporary arrangements but they may lock-in and become dominant for extended periods of time.

In real life when digging into customer needs we need to look to availability, emotions, response to design, likes and dislikes, morals and behavioural norms, inspirations, aspirations, expectations and rewards etc. The effect of influencers should be of particular of note.

Social media could be considered a current dominant manifestation of strange attractors. One that has become familiar to us with our everyday usage of it and yet it continues to change daily. With changes in structure, content and the users involved.

A significant area of interest for business is in trends, hits, fads and business cycles. Identifying an emerging strange attractor/attractors that are pulling these into play can enable a business to position itself to ride the next wave of change. Or perhaps take counter measures to see that emerging strange attractors that are negative, do not gain enough strength to lock-in and become dominant. Or like wise a business may act to reinforce a favourable situation.

It only takes a little imagination to realise that the strange attractors form the most fertile ground for business model innovation. Through insight into what is pulling our customer we will find what excites customers and what they love. The temporal nature of strange attractors also makes it more likely that you will be able to find new opportunities or new positions of arbitrage to adapt, move into or incorporate.

Apple

Often lauded for its success and imitated whenever possible by competitors, when it comes to strange attractors Apple are the masters to aspire to. Through the combination of simplicity, design and storytelling they have created a heady mix of inspiration, aspiration and sophistication as a response to the continually evolving attractors in tech space.

Apple has built platform, which as we know, keeps customers connected to it and for a nice premium price. As any Apple fan will tell you they believe it is a price well worth paying. Interestingly Apple is not often first to market, however once it applies its DNA, Apple is more often than not a hit.

The Apple brand has achieved some serious lock-in as a significant strange attractor. People are draw to it for many reasons, most of which are beyond requirements or results. It is obviously a business that looks deeply into the complexity in which it plays to find value propositions that continually reward both customers and the business.

Finding a Value Proposition that Resonates

If you go beyond form and function then most of the needs of our customers and our business have a basis that can be found in strange attractors. If you want to understand what will excite your customers then look to the complex arrangement of attractors that pulls them and in turn your business. Open your thinking and put aside your assumptions, ask why and in turn learn to see. There you will find the foundations with which to begin designing a business model with a value proposition that resonates with and excites your customers. You may even find yourself with a new strange attractor that customer’s love and pulls them in your direction.

For more detail on attractors you may wish to delve into the world of non-linear systems, resilience and complexity.

]]>http://blog.business-model-innovation.com/2015/01/pull-in-business-models-3-types-of-attractors/feed/11162http://blog.business-model-innovation.com/2015/01/pull-in-business-models-3-types-of-attractors/The missing part for business model innovation: The processhttp://feedproxy.google.com/~r/Business-Model-Innovation/~3/-0Rod55l9tA/
http://blog.business-model-innovation.com/2014/11/missing-part-for-business-model-innovation-the-process/#commentsWed, 12 Nov 2014 12:58:47 +0000http://blog.business-model-innovation.com/?p=1146Continue reading The missing part for business model innovation: The process]]>Recently, I had an intensive discussion with David Siegel who just moved to Zurich. His big idea is business agility and he is so right since the missing part in business model innovation is the process moving from your current business model to a better future. He calls it business agility. We at fluidminds use Rethinking business and Entrepreneurial Design for the process.

Regardless what wording we use, what we need is a process that helps companies to develop innovative business models that customers, employees and the owners love.

Today, two processes exit in companies that could be used: the innovation process and the strategic planning process. The names of the processes suggest that they could be useful, however in reality the opposite is the case.

Why? They lack agility and experiments. Both processes have the hidden assumption that with more and better planning you can anticipate the future. Both are focused on existing products and markets. These tacit assumptions might be right for a world of sustaining innovations, in a world of more-of-the-same.

But, and that is a BIG BUT, not in a world which is radically changing. Business model innovations have a disruptive character and focus on the whole business model. There is a need for business model innovations in any industry due to the Internet, the demand for clean energy, globalization, and due to the rise of Asia.

Therefore, almost every firm needs a different approach to innovation and strategy.

The future is not about prediction but about shaping the future with agile experimentation on what works and what does not work

Regardless how much you plan, you will not predict the future because neither customers nor companies can anticipate what is possible. The only way to push for radical innovation is to accept the uncertainty and thereby accepting that with more traditional planning we can not predict the future.

By saying so, I do not mean that we need no planning or management anymore. We even need it more than ever, but with a different aim. The aim should not be to predict the future but to plan a creative process how to shape the future.

Creativity let alone is a messy process. A well-structured process can turn creativity into a powerful force. The process forces companies into a getting-things-done mode. With the agile process you push for fast experiments and thereby faster learning. You try not to fail big but small. Small failures are not failures but fast learnings.

What do you need in the process?

Agility: Agility is not velocity (speed in a given direction) but finding fast the right way to go.

Business Model Thinking: The building blocks of a business model are your new boxes to think in. So you circumvent the problem to always start with the classical points of innovation like products or processes.

Jobs-to-be-done: Thinking in jobs-to-be-done instead of products. Thereby dissecting your current business model in the jobs you solve for your customer. The products are just means to solve the jobs. Customers hire the products to get a job done.

Open and Focus: Your process has to force you to open your mind at the beginning, to let you see things differently, but the process also needs to force you to take decisions on what you want to focus on and how you can test your assumptions.

The process is not linear: There are pivots where you have to jump back when a core assumption has proved to be wrong.

Beware that we are humans: A business is not Lego blocks that you can rearrange according to your will. We are humans and humans make the difference between a good and a great business. So focus on the human side of business. Humans are the biggest source of creative solutions but also the biggest impediment for new solutions.

Unlearning: As we all know, unlearning is not possible for humans, since we have no delete button in our head. But with the jobs-to-be-done approach and the business model canvas you can unhide your tacit assumptions about your business. Once, we have unveiled the hidden assumptions we can try to overcome them.

Give meaning: Focus in the process on giving meaning to your customers and employees.

Diversity: You need a group of people with different backgrounds, sexes and education. Otherwise, you will not unlearn. Diversity helps.

Customer Insights: Taken the jobs-to-be-done approach, you have to develop insights into your customers and their badly or unsolved jobs.

Technology Insights: Understand technology, very deeply but not the technological features but what its business idiosyncrasies are and what are repercussions your business but also for your customers are. Together with your customer insights you can come up with solutions you have never dreamed of.

Testing & Prototyping since a business is a set of assumptions: By accepting that all you know about your business is an assumption but not reality until you have tested your assumption. But even then, most factual know-how in business are human believes and not scientifically proven natural laws that never change.

The business model canvas gives you the right boxes for new and fresh ideas, the process helps you to fill the boxes. In an upcoming post, we will elaborate how we do it at fluidminds.

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What is your experience? What process do you use to develop business model innovation? Write us and share your insights. This blog is a blog about business model innovation and not my personal blog, so any great articles are welcomed. Love to hear from you soon.